2015 Ball State study urged “TIF usage should be reviewed by the state legislature since the average district has no meaningful impact on county economies.” Holcomb Administration cut off access to the data and created “super TIF.”
July 28, 2018-A 2015 report by the Ball State University Center for Business and Economic Research (CBER) concluded that the use of Tax Increment Financing (TIF) in Indiana has been ineffective in creating jobs or increasing growth. In discussing the report, CBER Director Michael Hicks stated “In fact, we found that in the average county, creation of a TIF district led to fewer jobs in manufacturing and retailing as well as a slight drop in the number of businesses.” The study recommended that the Indiana Legislature examine the use of TIF and improve TIF reporting. Immediately after the report was issued, the Holcomb Administration stopped reporting TIF data.
- What is Tax Increment Financing
According to the website Good Jobs First, “As businesses locate in a TIF district and the area redevelops, the property values rise. Rather than simply collecting the increased taxes from TIF district properties, the city splits the property tax revenues into two streams. The first stream is set at the original amount of the property value before redevelopment, known as the “base rate.” This stream continues to go where it did before, typically to the school district or the city’s general fund that pays for local services such as police and fire departments.” The second stream, known as the increment, goes to local redevelopment commissions who use it for incentives to lure business, infrastructure improvements, and other expenses associated with economic development. Economic development has been broadly construed and is rarely challenged.
TIF revenues are often bundled and bonded since the projects require large upfront costs. “The money a city invests in TIF projects is often obtained through the sale of bonds, which are then repaid over time with the annual tax increment funds. If the incremental revenue is not sufficient to pay off the bonds, the city has to make up the difference.” (See https://www.goodjobsfirst.org/accountable-development/tax-increment-financing ). TIF districts are “neutralized” every year in order to distribute the income based on increases or decreases in value. In Indiana, this method of financing is especially attractive to local leaders because the debt falls outside the Constitutional limits on borrowing. Funds are controlled by an appointed redevelopment commission (RDC) and the City Council has little oversight over the day to day activities of the RDC.
The Indiana TIF Viewer allowed residents to see parcel level detail regarding the base and increment in a TIF up until the 2015 pay 2016 tax year. Residents could also compare the incremental value (the amount going to the RDC) and the base value (the amount going to schools, police and fire) each year. The total amount which goes to the RDC and to the City was also reported. This was extremely useful information for residents who wanted to be informed as to where their tax money was going. In 2015 pay 2016, TIF districts in Lake County had $66.4M in revenue and $85M in expenses. There were over $480M in bonds outstanding in Lake County TIF Districts in 2015.
Porter County relied even more on TIF. In 2015 pay 2016, Porter County saw $59M in property tax revenue diverted to TIF districts. Expenses for all TIF districts were $105.6M. LaPorte County diverted only $10M to TIF and had total TIF expenses of $16M.
The above numbers are all for the year 2015 because we no longer have access to this data. Indiana law still requires each RDC to report the data to the State but the State no longer presents that data in a usable format on the website. At the same time, the Indiana Legislature has been busy providing the Northwest Indana Regional Development Authority (NWIRDA) the power to create “super TIFs” around transit stations. According to Representative Hal Slager’s House Bill 1144, the unelected officials at the NWIRDA can create a “transit development district” up to one mile from any station area. The NWIRDA then collects all increment in property tax, local option income tax, sales tax and state income tax from that district until the year 2047.
Schools are increasingly forced to have referenda and local communities can’t afford to hire the police officers necessary to maintain adequate staffing levels while developers receive millions of dollars in incentives with little or no accountability. Bankers push the plan because borrowing costs are 5-10% up front but those paying the tab are now shut out from any information regarding the income or expenditures.
We urge Gazette readers to check out the entire Ball State report below and to ask your elected officials to provide TIF information on the State website in the same format it was provided in the past.